Huge demand for data centres means more ball bearings

There’s a good chance your Instagram photos are making money for Japanese ball-bearings manufacturer Minebea Mitsumi Inc.

The Tokyo-based company, which counts Apple Inc. as one of its main customers, makes various components used in data centers. That includes ball bearings in hard drives and cooling fans, which are in high demand as the world generates, processes and stores more information.

As everything from refrigerators to self-driving cars throw off information that needs to be uploaded to the cloud, data centers will be housing 1.3 zettabytes (1.3 trillion gigabytes) by 2021, more than double from this year, according to Cisco Systems Inc..

That’s helped Minebea, which this month lifted its earnings outlook for the third straight quarter on strong sales of data center-related parts. Valued at almost $10 billion, Minebea is also benefiting from the success of Nintendo Co.’s Switch console, which is assembled by Mitsumi, a unit acquired last year. The company’s stock doubled in 2017.

Bloomberg News sat down with Chief Financial Officer Hiromi Yoda to talk about earnings growth, Nintendo, and what the zettabyte era means for his company.

How is business?

The demand for ball bearings is very strong and we’re increasingly eating through our inventory. Demand from data centers in particular is very strong. We’re quite surprised by growth of fan motors for cooling data centers. It’s not enough to have one data center, but you need backups. And then a backup for your backup. The data you see on Instagram and other services, that keeps increasing. People aren’t deleting their photos. And we’re very thankful for that.

Are you planning more investment?

We still have capacity to increase by 15 million bearings annually by using space in existing factories in Thailand, which will bring capacity to 300 million by May or June. But it is becoming necessary to invest in new factories. We’re considering possible locations.

How much would you be willing to spend?

We’ve already invested 8 billion yen in expanding capacity, but that was within existing locations. To build infrastructure for a brand-new factory requires a number that has an extra digit. That’s why we have to consider it very seriously.

Will we see profits revised higher again?

I can’t speak about short-term earnings, but when we laid out our medium-term plan last May we expected operating profit to reach 100 billion yen by March 2021. It’s beginning to look like we can arrive at that number a year early.

What’s the outlook for the game-console assembly business?

Our customer is doing very well. We won’t know next fiscal year’s numbers until March. But we’re not a supplier, we’re an assembler. We can deal with bigger demand and won’t need additional investment.

How is the merger with Mitsumi going?

The increase in efficiency is going faster than expected. The business is doing better as our customer is selling more units, but also because of our improved profitability.

You supply LCD backlights to Apple. How is that business doing?

We’re actually doing better than expected. People make a big deal about how great OLED is, but it’s hard to see the screen in daylight. And if you put three OLED screens next to each other, they’ll all show slightly different colors. LCD isn’t going to go away completely.